Monday, December 5, 2022

Capitalism Series, Part 2: The Short-Sightedness of Quarterly Reports

 While I would never put the white hat completely on corporations, I think many of their problems are caused or made worse by the quarterly reports. CEOs, department heads, sometimes an entire company's future is on the line because of what Wall Street thinks of a quarterly report. 

Even the shareholders are subject to the whims of Wall Street. It comes down to a few people who punish or reward companies for meeting (or failing to meet) their expectations. Somehow, wondering whether Wall Street got it right or wrong is never the question. 

I hold stocks, too. In my 401k, and in a personal account, but I generally invest in index funds, less weighted by one or even a few select companies. I can appreciate the shareholders' need to know, but why so often? Wouldn't twice a year be plenty? 

Companies are held to this impossible standard of beating expectations every quarter. There might be one (Apple) that has managed to do this, but I think every other company has seen its share of ups and downs. And even Apple had its down days way back when. 

Very few are willing to dive deeper than whether profits are up or down. Never mind if the company bought some badly needed equipment that increased their expenses, but decreased human injuries. Human injuries aren't included in quarterly reports. 

Even when a company has an outstanding report, the very next day, the question becomes, how will we fare next quarter?

Which doesn't help a company think about long-term planning, doesn't allow time for R&D, doesn't even reward companies when they recall products to keep everyone safe! Despite another bad ruling by the Supreme Court, corporations are not themselves people, but they are indeed comprised of people. 

Most people didn't start their first day thinking that they'd hate the job. They go in with all kinds of enthusiasm, hoping to feel valued. But work enough days in a corporation, everyone comes to realize that the corporation prioritizes their quarterly reports above all else. Of course people want to quiet quit! Or quit altogether. Just because an abused spouse stays doesn't mean they enjoy it - they just don't see a way out.

I wonder what would happen if the quarterly report did include injuries, retention percentages, customer complaints? I wonder what would happen if CEOs got their bonuses docked for injuries, complaints, lack of retention? 

I'm starting to shop more B Corporations, which is a designation for companies that are committed to benefit all stakeholders, not just shareholders. It's a step in the right direction, and if more companies got on board, it might just change the world. 

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